Low-paid families working full-time are unable to earn enough to meet their families’ needs due to the freezing of tax credits, benefits caps and cuts and rising prices, according to new research from Child Poverty Action Group.
It finds that even families with two parents currently working full time on the ‘national living wage’ are 11% (£49 per week) short of the income the public defines as an acceptable, no-frills living standard.
For lone parents, even a reasonably paid job (on median earnings) will leave them 15% (£56 per week) short of an adequate income because of the high cost of childcare, says the report, adding that a lone parent working full-time on the ‘national living wage’ will be 20% (£74 per week) short of what they need to achieve a minimum standard of living. The CPAG calculates that a lone parent relying solely on benefits will go without 40% of the budget they need for a socially acceptable minimum.
With the introduction of the two-child limit on tax credits, the CPAG says families with three or more children fare worst – it estimates a third child born after 1 April 2017, for whom no additional support will be provided, costs around £86,500 or £4,800 a year excluding childcare.
It adds that the benefits cap is particularly hitting larger families. The cap which restricts support to £23,000 in London and £20,000 outside London regardless of family size. It says the impact of the benefit cap means that an out-of-work family with three children living in a privately rented home will receive just a little over a third of what they need to meet their needs, with a shortfall of around £400 per week.
Another issue is childcare. The CPAG says full-time childcare costs around £80,000 over the course of childhood, making up around half of the total costs of bringing up a child. For those receiving Universal Credit, 85% of childcare costs can be reimbursed, but the CPAG says the reporting requirements are complex and because Universal Credit is paid in arrears, it is hard for parents to pay childcare fees in advance.
It states that the new 30 free hours early years entitlement (available to parents of 3 and 4 year olds working more than 16 hours per week at the minimum wage) has helped, but says parents can face difficulties finding nurseries and childminders offering this. The alternative is limiting working hours.
Chief Executive of Child Poverty Action Group Alison Garnham said: “Today, the majority of children growing up in poverty have working parents. While the number of parents in work is increasing, income from work alone is not sufficient to enable some to meet their families’ needs or escape poverty and the cost of a child is substantial. There is strong public support for government topping-up the wages of low-paid parents and investing in children is the best long-term investment we can make. By using the forthcoming budget to unfreeze benefits and restore work allowances, the government can take steps towards making work really pay.”